A panel of State Finance Ministers veered around to agree on a proposal to levy 3% GST on sale of old gold and jewellery to check tax evasion, Kerala Finance Minister Thomas Isaac said.
The Group of Ministers (GoM) also decided to implement the e-way bill system for transportation of gold within a State.
Mr. Isaac said on Friday that the GoM arrived at a consensus on bringing sale of old gold within the GST ambit under reverse charge mechanism (RCM). ‘Sale of old gold will attract GST at 3% under RCM.’ This would check tax evasion as most smuggled gold is sold as old jewellery to evade GST.
It was decided that sale of old gold will attract GST at 3 per cent under RCM. The officers’ committee will now work on the modalities,” Isaac told PTI.
Isaac said this would put a check on tax evasion as currently most of the smuggled gold is sold as old jewellery to evade GST.
Under RCM, the buyer would be liable to collect and deposit the GST with the government.
GST RATES ON GOLD JEWELLERY-
Gold jewellery is classified under chapter 71 and GST is payable @3% on gold.
REVERSE CHARGE MECHANISM APPLICABILITY ON OLD GOLD JEWELLERY –
There had been a lot of confusion regarding the applicability of the reverse charge mechanism in case the jeweller purchases old gold jewellery from the customer. The said position has been clarified by the board vide press release dated 13th July, 2017.
Section 7 of the Central Goods and Service Tax Act, 2017 provides the scope of supply and as per the said section, the expression ‘supply’ includes all forms of supply made for a consideration by a person in the course or furtherance of business. It has been clarified that the sale of old gold jewellery by the customer is for a consideration, however, the same cannot be said to be in the course or furtherance of business
The reason being provided for the same is that selling of old gold jewellery is not the business of the individual and hence the said transaction does not qualify to be a supply and hence it will not attract any provisions of GST and hence no tax is payable on a reverse charge basis.
However, it must be noted here that if the old gold jewellery is sold by the unregistered supplier to the registered supplier, provisions of the reverse charge mechanism are applicable and tax is payable accordingly.
BENEFICIAL POINT TOWARD REVENUE THROUGH NEW PROVISION-
Buying new jewellery in exchange of old gold jewellery if very common. And, jewellers also make good profit in this exchange business. Good to get the clarification. Customers can save GST for exchange of old jewellery. But, jewellers may use this as loophole to evade tax. Jewellers have huge stock of un-accounted gold stock with them. They may bill every sale as an exchange of old gold, sell gold without bill and evade tax.